Big Data: Big Benefits For Modern Legal Depts

This trend is truly serving a legal department's ultimate purpose: minimizing risk. Modern legal departments are embracing the big-data trend, using it to guide their company into the future.

Here's how.

Does The Legal Dept. Make This Stuff Up?

Business managers increasingly look to the general counsel (GC) for reliable information about legal costs, accruals, and outcomes.

However, in litigation—where outcomes are both binary and often carry the biggest risks—GCs are often forced to make extremely subjective predictions. In most cases, they must rely on the advice of their outside litigators.

Do these questions and answers sound familiar?

You need to deliver a budget to the CFO. You ask your outside counsel: “How much will this litigation cost?” They answer: “We can only estimate, it’s very hard to predict.”

Outside counsel exceeded their predicted cost. You ask: “Why has this case cost so more than you predicted?” They answer: “It’s not our fault, your costs largely depend on how the other side chooses to litigate.”

You want to know if the Company will win an important motion. You ask: “What are our chances of winning?” They answer: “50-50. It depends on the Judge.”

You need to explain to the CEO why we lost. You ask your outside counsel: “What happened here? You were confident of winning!” They answer: “We definitely out-litigated the other side, but juries are unpredictable.”

You might be asking, “Does this really happen?” Oh yes. A lot.

Enter Big Data

Data is being collected at an astonishing, exponential rate. According to the Compliance, Governance and Oversight Counsel, 90% of all data throughout history was created in just the last two years. The costs of storing and managing this information are plummeting due to innovative storage technologies.

Moreover, innovative companies are developing new methods of mining data for its secrets. For the Modern GC, that means data about real law firm rates, the number of hours it actually takes to complete complex tasks, and predicting outcomes based on many thousands of judgments and settlements.

So technology is giving us an answer better than “it depends.”

Controlling And Accurately Forecasting Costs

Most companies don’t build an internal legal team at a scale to manage all the issues a company will face: They intentionally rely on outside counsel for many areas of coverage.

A good rule of thumb is that 50% of a company’s legal spend is on internal staff and 50% is on outside lawyers. But this 50:50 ratio shifts heavily towards outside counsel when it comes to litigation: 10:90 isn’t unusual.

That magnifies the frustration of poor forecasting and ineffectual predictions.

Big Data To The Rescue

New companies are creating massive databases to arm the Modern GC with reliable data about billing rates—published versus actual.

They know the discounts that firms are giving, and the average total bills for all sorts of legal deliverables—from simple tasks to entire trials. This is empowering Legal departments, improving GC-CFO relations, and increasing competition for legal work, which drives rates down and service up.

So law firms must hate this new reality, right? Far from it: Rather than negating or denying the data, enlightened firms are using the same information to better predict and manage their own fees and costs. This leads to alternative fee arrangements and other creative billing solutions that are truly reliable and fair to both parties.

In fact, big data is replacing or supplementing the inherently conflict-riddled “billable hour.”

Predicting Legal Outcomes

Big data is also helping the modern GC more accurately predict the results of a case before the first salvo is fired.

Yes, every case is unique, but there's reliable data about the cost-to-try, probable settlement amounts, and jury verdicts in most examples. The breadth and depth of that data is only improving.

As big data becomes widely available to both sides of a conflict, it improves lawyers’ case analysis, and leads to more and earlier settlements—causing fewer trials. It could lead to fewer cases being filed at all. This frees public resources—courtrooms, judges, clerks, deputies—for those cases where there’s truly an important societal issue that can only be resolved in a public forum.

So tomorrow’s business will make better decisions at the beginning of a battle and before the good money follows the bad.

The Bottom Line

Information is being democratized. It’s being analyzed in new ways.

This leads to a modernization of the practice of law, especially in the otherwise-subjective areas of cost forecasting and outcome prediction.

Modern GCs are embracing this trend, using it to guide their department and their company into the future.